The ongoing recovery on the demand side has been stalled recently by bankruptcy filings, from several airlines that have caused over 50 narrow body aircraft, to be available for lease in the current market, over and above normal supply levels.

We are concerned of the possibilities that marginal operators will either seize operation or reduce their fleets to right size their business over the coming months. Although, this will put downward pressure on the lease rates, in the short term, we expect rates to recover as airlines gradually absorb the oversupply.

On the (inaudible) front, we are now seeing increased opportunities compared to recent years. Some traditional source have pulled back for a variety of reasons, be it the lack of debt, the need to husband capital, pre-delivery payments on their order positions, or because they must scale back acquisitions due to portfolio concentration issues. We expect the next 24 months, to provide attractive opportunities to deploy capital and high yielding and in creative deals for FLY.

Since we now find the best value in a flying aircraft, FLY will increasingly be shifting its strategy from equity indebt repurchases to aircraft transactions. Although, the debt markets remain challenging, we’ve seen some traditional lenders re-enter the market, or be it on a more selective basis and with higher margins. In addition non-traditional lenders from Asia-Pacific have filled some of the void left by European lenders. So far higher credit margins have been offset by lower levels of absolute interest rates. We expect this trend to continue in the near term.

BBAM, which is 15% owned by FLY, has a 22-year history in aircraft leasing. BBAM manages over 450 aircrafts, is supported by a 110 employees globally and is led by seasoned management team, with a proven track record, in remarketing, re-origination and debt sourcing, as evidence by the acquisition and financing 52 aircrafts last year, by BBAM on FLY’s behalf.

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